Retail Practice

Delivering when it
matters: Quick-service
restaurants in
coronavirus times
The pandemic has hit many quick-service restaurants hard. Here’s
how they can respond to the crisis and prepare for what comes next.
by Sabine Becker, Stacey Haas, Eric Kuehl, Ignacio Marcos, and Kumar Venkataraman

© Kmatija/Getty Images

April 2020
 With much of the world’s population being asked
or required to stay home and follow physical-
distancing guidelines, once-bustling restaurants
and cafés now sit empty. Although a few quick-
service restaurants (QSRs) are seeing heightened
demand in takeout and delivery—several US
pizza chains, for instance, are hiring thousands of
workers as orders spike—most other QSRs have
experienced dramatic sales declines. Some have
closed their doors for good.
The coronavirus pandemic is a humanitarian crisis
whose economic impact will almost certainly be
severe as well. As our colleagues wrote in a recent
article, “The required ‘lockdowns’ of the population
and other efforts to control the virus are likely to
lead to the largest quarterly decline in economic
activity since 1933.” They expect an unprecedented
40 to 50 percent decline in discretionary
spending—a roughly 10 percent reduction in GDP.1
(See McKinsey.com/coronavirus for our most up-to-
date insights.)
The QSR industry has been hit particularly hard. A
few restaurants have already declared bankruptcy;
others report that they soon won’t be able to cover
their rent and personnel costs. In the United States
alone, up to seven million restaurant workers could
lose their jobs by June, according to the National
Restaurant Association.
Undeniably, QSRs face tough decisions in the
coming weeks and months. But some QSRs will
fare better than others, depending on their starting
point and the actions their leadership teams take.
This article lays out a series of practices—critical
for “navigating the now,” planning the comeback,
and shaping the future—that can help QSRs not
just survive the current crisis but also position
themselves to succeed in the “next normal.”2
COVID-19’s impact on
consumer behavior
In many countries, QSRs are either closed entirely
or operating on a limited basis, offering only
1
Kevin Buehler, Arvind Govindarajan, Ezra Greenberg, Martin Hirt, Susan Lund, and Sven Smit, “Safeguarding our lives and our livelihoods: The
imperative of our time,” March 2020, McKinsey.com.
2
Shubham Singhal and Kevin Sneader, “Beyond coronavirus: The path to the next normal,” March 2020, McKinsey.com.
2 Delivering when it matters: Quick-service restaurants in coronavirus times
takeout, pickup, delivery, drive-through, or some
combination of those options. Even among QSRs
that remain open, the drop-off in business has been
steep. Consumer-sentiment surveys that McKinsey
conducted in late March across Europe and the
United States indicate that during the crisis, most
consumers expect to reduce their spending on all
restaurant food—takeout and delivery, QSRs, and
other types of restaurants.
Meanwhile, in China, where physical-distancing
restrictions have already been loosened, consumer-
sentiment surveys reveal the following three trends
(exhibit) that could play out in other geographies
as well:
— Postcrisis spending on in-restaurant dining
is expected to be lower than precrisis levels,
largely because consumers will still be wary of
being in densely populated public spaces.
— Demand for takeout is expected to return to
precrisis levels fairly quickly.
— After the pandemic, consumers will likely spend
more on food delivery, prepared foods, and
groceries than they did before the pandemic.
Again, because of financial strains and lingering
concerns about eating in crowded places,
consumers will likely continue to prefer eating at
home, at least for a time.
The specific challenges each QSR faces during
this crisis are unique, depending on the company’s
financial and market position and the pandemic’s
timing and progression in local markets. But every
company can take inspiration from what some of its
counterparts around the world are doing.
Actions to consider, both for now
and for later
Drawing on lessons from the past several weeks, we
have identified a set of actions for QSR executives
to consider during these challenging times.
 Delivering when it matters: Quick-service restaurants in coronavirus times
Exhibit 1 of 1

Exhibit

The accelerated shift to grocery and food delivery could persist after the
COVID-19 crisis.
Change in spending preference, China, net intent1

During COVID-19 vs before COVID-192 After COVID-19 vs during COVID-193

Dine-in restaurant –41 25

Takeout –29 28

Food delivery –20 32

Ready-made food from grocery store –12 27

Groceries from grocery store –3 33

1
Net intent is calculated by subtracting the % of respondents stating they expect to decrease spend from the % of respondents stating
they expect to increase spend (total respondents, n = 611; sampled and balanced to match China general population aged 18–65 years).
2
Question: How has your spending per month changed during the COVID-19 outbreak compared with before the COVID-19 outbreak?
3
Question: How do you expect your spending per month to change after the COVID-19 outbreak compared with now (during the
COVID-19 outbreak)?
Source: McKinsey COVID-19 Survey (mobile), Mar 21–23, 2020

‘Navigate the now’: Short-term priorities
While QSRs should stay abreast of how the situation
evolves, they should take immediate action in
certain critical areas. Short-term priorities for QSRs
during the crisis include the following:
to minimize human contact. In addition, most QSRs
have increased the frequency and rigor of in-store
cleanings, making sure to sanitize high-touch areas
(such as counters, self-checkout screens, and door
handles on coolers and freezers).

Protecting employees and customers Safeguarding the top line

By now, most QSR players have established new
health and safety processes and policies to protect
employees and customers. Some of the practices
QSRs have implemented include adjusting travel
policies to permit only the most critical business
travel, encouraging or requiring remote working for
corporate staff, and amending sick-leave policies
for employees affected by COVID-19. QSRs have
also adjusted their onsite offerings to follow
local and national guidelines—for example, by
shutting down self-serve prepared-food counters,
suspending all customer events, and switching to
a delivery-only model.
With regard to hygiene and safety, QSRs have
instituted strict protocols, such as providing hand
sanitizer and thermometers and training employees
Despite physical-distancing regulations,
restaurants can continue to generate sales. In
localities that prohibit on-premise dining, QSRs
have ramped up their takeout and delivery
capabilities and adopted new marketing tactics to
reach consumers who may not actively be searching
for these services.
— Doubling down on the online channel. Many
QSRs that built their own online-ordering
mechanisms on their websites or mobile
apps are working to make sure these can
handle an increase in demand. Meanwhile,
companies that don’t have their own online
capabilities are partnering with call centers,
delivery aggregators, and other third-party
providers—though serving customers through

Delivering when it matters: Quick-service restaurants in coronavirus times 3

 A return to previous demand levels
won’t happen right away, so QSRs
will need to take a phased approach to
bringing back labor, dine-in operations,
and supply-chain support.
such partnerships yields significantly lower
margins (because aggregators, for instance,
typically take 25 to 30 percent of the value of
each transaction). In either case, restaurants are
finding that they need to expand their delivery
fleets. Some are reassigning in-store employees
to assist with delivery operations.
— Simplifying kitchen operations while meeting
customers’ changing needs. During this crisis,
consumers have become more willing to have a
broad array of food products delivered to their
homes. For example, beverages, bread, and
fruit—products that consumers have historically
preferred to consume in restaurants or buy in
grocery stores—now increasingly appear in
restaurant-delivery orders. Some restaurants
are therefore expanding their delivery menus,
giving customers more choices in both fresh
and prepared foods and even, in some cases,
offering meal kits that customers can put
together at home. However, QSRs recognize
the need to simplify their operations to avoid
putting further stress on an already-strained
workforce. They are therefore striving to meet
new consumer needs without making kitchen
operations more complex.
— Sending targeted customer communications.
Communicating with customers is especially
important for QSRs during this time, as
restaurants face increased competition from
4 Delivering when it matters: Quick-service restaurants in coronavirus times
home cooking. With people spending almost
all their time at home, QSRs are shifting their
marketing spend to home-based channels,
such as TV or online, and from sports channels
to news outlets. They are also securing
preferred placement in food-delivery apps. In
addition, some QSRs are engaging with trade
associations and industry experts to ensure the
appropriateness and accuracy of their marketing
messages (for instance, in ads emphasizing
safety of food delivery or takeout).
Stabilizing the supply chain
Restaurants need a reliable supply chain—not just
for food ingredients but also for essential supplies
to keep the business running: disposable paper
goods (such as napkins and food cartons), cleaning
products, spare parts for the vans and motorbikes
used for food deliveries, and so forth. To minimize
the risk of disruption in the supply chain, QSRs
are taking a range of actions, such as limiting
menus to match what they can predictably source,
substituting frozen products for fresh products
when necessary, revising purchase orders to
align with demand, identifying alternate suppliers,
and collaborating with manufacturers to create
contingency plans. To support small and midsize
suppliers that might be struggling during the crisis,
some cash-rich QSRs are adjusting payment terms
or offering temporary loan options. A handful of
forward-thinking QSRs are also taking advantage of
historically low commodity prices (of oil and chicken,
 for instance) by purchasing ahead where possible or
by pre-booking freight capacity.
Managing cash
Most QSRs can expect to generate only a small
fraction of their normal revenues for the foreseeable
future, so cash management is a clear priority. Some
QSRs have established a “cash lab”—a central
team with full visibility into cash forecasting and
optimization. The cash lab stays on top of regulatory
developments in each market so that, where
appropriate, the company can receive government
aid, benefit from tax deferrals or credits, or apply for
federal loans as quickly as possible.
To conserve cash, QSR leaders are postponing or
renegotiating rent payments, deferring noncritical
indirect spend and capital expenditures, and
reducing personnel costs through hiring freezes and
efforts to take advantage of government-funded
programs, such as Germany’s Kurzarbeit, or “short-
time work” wage subsidy. In addition, they are
preparing clear and detailed messages for investors
about their plans for generating cash and the timing
of those initiatives. 3
Modeling a range of scenarios
When will people start eating in restaurants again?
The answer will be different everywhere—but we
expect the mandated closures to extend beyond
the dates originally announced, at least in Europe
and the United States. And we expect that, for
health and safety reasons, restaurant dining rooms
will be among the last businesses that will be
allowed to reopen. The timing of recovery will also
vary by country. We see China recovering ahead
of many western countries including Italy and the
United States.
For QSR players with locations in multiple markets,
one crucial exercise is to model three-month, six-
month, and 12-month scenarios for each market and
to develop concrete action plans for every scenario.
If, for instance, restaurants remain shut in six
3
Tom Kolaja and Tim Koller, “When investors call: How your business should talk about coronavirus,” March 2020, McKinsey.com.
4
Mihir Mysore and Ophelia Usher, “Responding to coronavirus: The minimum viable nerve center,” March 2020, McKinsey.com.
Delivering when it matters: Quick-service restaurants in coronavirus times
months’ time, QSRs may need to reduce fixed costs
drastically by renegotiating leases and credit terms
or by selling real estate. If restaurant closures last
even longer than six months, some companies may
need to seek new lines of credit, divest business
units, or even put themselves up for sale.
Ideally, this kind of scenario modeling and contin-
gency planning will be among the responsibilities
of a COVID-19 nerve center—a cross-functional
team that has access to real-time data on how the
situation is evolving. This team helps ensure that
company leaders are aligned on the scenarios as
well as on the portfolio of actions for each scenario. 4
Plan the comeback: Medium-term actions
As stay-at-home mandates begin to lift and
restaurants reopen, QSRs will need to have plans
in place to capture returning demand. A return to
previous demand levels won’t happen right away,
so QSRs will need to take a phased approach to
bringing back labor, dine-in operations, and supply-
chain support.
In the immediate postcrisis period, we see QSR
companies choosing between two sets of strategic
actions, depending largely on each QSR’s financial
and competitive position. Companies with low
liquidity and weak competitive differentiators would
need to pursue “preserve and grow” actions. On
the other hand, companies with strong financial
fundamentals and competitive advantages
can aggressively build on their strengths. QSR
companies that entered the crisis from a position
of strength will, of course, have more options and
greater flexibility in preparing for the recovery.
‘Preserve and grow’
Some QSRs entered the crisis in an already
precarious cash position. Broadly speaking, these
players tend to have a few attributes in common:
a heavy reliance on their brick-and-mortar
restaurants, a minimal presence in digital and
delivery channels, menus that aren’t sufficiently
5
 differentiated from those of competitors, and limited
loyalty programs. They also tend to be more prone
to supply-chain instability because of a small and
dispersed supplier base.
During the crisis, these companies will be focused
on avoiding bankruptcy; they need to find ways
of adapting their offerings while conserving cash.
But even during the recovery period, cash-poor
restaurants will need to keep instilling a cash-
conscious culture at all levels of the organization.
They’ll need to remain vigilant with their spending,
in part as a cautionary measure in the event of a
resurgence of the coronavirus. For these companies,
continuing to create weekly cash-flow projections
and to conduct financial-health evaluations regularly
across the network will be important. They also
should consider renegotiating contracts to increase
flexibility—for example, by tying rent to revenue.
At the same time, cash-constrained QSRs should
constantly communicate with their customers,
particularly their most loyal ones, who will be their
best lever for increasing demand once restaurants
reopen. To make sure that brand communications
are consistently sensitive and will resonate with the
customer base, QSRs should run frequent “pulse
checks” on consumer sentiment.
And of course, an important “preserve and grow”
action for QSRs will be to continue to prioritize
hygiene and safety while controlling costs.
Companies will need to establish stringent labor
processes and schedules in their restaurants; some
might consider simplifying menus to further reduce
complexity in kitchen operations.
‘Build on strengths’
Other QSRs, by contrast, entered the crisis with
strong liquidity positions. These financially stable
companies tend to have well-established digital and
delivery channels and strong loyalty programs. Most
have invested in the supply chain by building up a
stable supplier base and developing contingency
plans to minimize supply-chain disruptions in times
of crisis.
6 Delivering when it matters: Quick-service restaurants in coronavirus times
During the recovery, these companies can
accelerate growth by increasing their investments
in mobile and delivery solutions, offering value-
meal and family-meal promotions, and focusing on
occasions that saw the biggest declines during the
crisis (such as breakfast on the way to work). They
can entice customers to return to on-premise dining
with attractive promotions and new menu offerings.
They might also consider launching task forces
to conduct competitive scans: in some markets,
competitors may either be struggling or have closed
locations. QSRs could step up their marketing
efforts in those areas to capture market share.
Stronger companies can also leverage their cash
positions for disruptive moves: they might, for
instance, make anticyclical investments, purchase
real estate, or acquire distressed competitors,
business units, or brands. As QSR companies seek
to form partnerships or make acquisitions, they
should consider not just economic rationales but
social rationales as well—for example, could a
particular M&A deal keep another company afloat,
save jobs in a struggling community, or strengthen
the restaurant industry for the longer term?
Shape the next normal: Long-term
considerations
As the crisis subsides, all QSRs must prepare for
the coming shifts, in consumer mindsets and
behavior, that will shape the industry’s next normal.
The following are some of the changes we believe
are possible:
— Greater concern about hygiene and safety.
Consumers will demand much more information
about what ingredients are in restaurant food,
where it comes from, how it’s prepared, and by
whom. Sanitization will become a significant
focus for restaurants; day-to-day operating
costs will increase as a result. Food-packaging
costs may also rise. Contactless delivery and
pickup may become the norm.
— Stronger demand for digital and delivery.
The competitive landscape in food delivery
 will be transformed as QSR players build
internal capabilities, invest in next-generation
technology (such as delivery drones), or join
forces with third-party providers. Loyalty
programs will become more robust as QSRs
look to increase “stickiness” among customers.
Some QSRs may also reformat their locations—
for instance, by shrinking seating areas and
increasing drive-through capacity.
the importance of flexibility and adaptability.
This challenge will galvanize QSRs to invest in
supply-chain technology and capacity so that
they can better—and more rapidly—align supply
with demand. Many QSRs also experienced
supply-chain disruptions as a result of labor
shortages during the crisis, and that may lead
them to accelerate their investments in supply-
chain automation.

— Shift in spending from QSRs to grocery stores.
Early signs indicate that some of the shift from
spending in restaurants to spending in grocery
stores will persist in a post-coronavirus world.
To supplement these losses, QSRs can look for
additional revenue streams; more QSR players
may, for example, consider launching grocery
product lines or expanding into new channels,
such as B2B catering. In response to lower
sales levels, some QSRs may also consider
reevaluating their corporate costs, restaurant
networks, and franchisee base.
— Increased focus on supply-chain management.
The COVID-19 crisis is exposing weaknesses
in many QSR supply chains and highlighting
QSRs need an operating model that can
accommodate the extreme level of uncertainty
facing the industry. Two practical steps they can
take to guide their decision making are to launch a
“plan-ahead team” and to direct that team to work
across multiple time horizons. 5
The QSR business, by definition, is about serving
customers at speed. We believe that if QSRs act
quickly in this crisis to meet the changing needs of
consumers while prioritizing people’s health and
well-being, QSRs can not only withstand these
difficult times but also build valuable capabilities for
resilience and success in the future.

5
Yuval Atsmon, Chris Bradley, Martin Hirt, Mihir Mysore, Nicholas Northcote, Sven Smit, and Robert Uhlaner, “Getting ahead of the next stage of
the coronavirus crisis,” April 2020, McKinsey.com.

Sabine Becker is a consultant in McKinsey’s Zurich office; Stacey Haas is a partner in the Detroit office; Eric Kuehl is
a consultant in the Chicago office, where Kumar Venkataraman is a partner; and Ignacio Marcos is a partner in the
Madrid office.

Designed by Global Editorial Services

Copyright © 2020 McKinsey & Company. All rights reserved.

Delivering when it matters: Quick-service restaurants in coronavirus times 7